Sharemarket tumbles as global panic sets in: Economy roundup

The biggest one-day fall on Wall Street since 9/11 has sparked a wave of selling in the local sharemarket.

The biggest one-day fall on Wall Street since 9/11 has sparked a wave of selling in the local sharemarket.

Wall Street plunged 4.7% after the collapse of investment bank Lehman Brothers, the sale of Merrill Lynch to Bank of America and revelations that major insurer American Insurance Group desperately needs $50 billion.

The meltdown spread around the world. In London, the FTSE index plunged almost 4%, while the German DAX was down 2.74%. In trade on Asian markets today, Japan’s Nikkei has shed a 4.3% while Korea’s Seoul Composite is down a whopping 6.2%.

Not surprisingly, worried Australian investors have also followed Wall Street’s lead this morning.

The benchmark S&P/ASX200 index was down 2.3% or 109.6 points at 4817.7 by 11:35am AEST.

The financial services sector has been hit hardest by the Wall Street calamity as investors question the debt levels of these companies as well as their ability to attract funding.

Investment bank Macquarie Group was down 7.3% at $36.60 after sliding to a four-year low of $36.20, while fellow investment bank Babcock & Brown slumped 33.5% to $1.05.

Infrastructure group Asciano, which holds a large amount of debt, has fallen 15.6% this morning, while diversified financial services group AMP is off 4.4%. ANZ was fared worst of the big banks, slumping 4.8%.

This morning also saw the release of the minutes of last month’s Reserve Bank board meeting. The minutes show the board cut rates because it had “concluded that the slowdown in demand the board had been seeking was unfolding”.

The board also gave special consideration to global financial market conditions. No doubt this topic will be taking up a lot month of time at next month’s meeting.